By Marc Hausman, President and CEO Strategic Communications Group, Inc. (Published July 12, 2004)

Every company would love to be in the position Google now finds itself in, with a successful IPO on the horizon and all of the press it can handle. Or even a Blackboard – a local company whose successful Initial Public Offering (IPO) put millions of cash into its coffers while producing a windfall for the company’s founders and private equity investors.

Even so, as the market swings up, your company may also have the opportunity to tender an IPO. The best time to plan communications for your IPO is now, because even though you may think you have to be “quiet,” you can still communicate.

The fact is, you can maintain business communications at the level your company established before the IPO, as long as you do not artificially stimulate interest in the stock before the registration. The key is to start acting like a public company before you formally start the IPO process. That way, you can build a communications action plan that will carry you through all phases of your IPO.

The more you have in place before the IPO process, the more you can do during the IPO and the greater the chances of success. Here are some key suggestions to ensure that you maximize your company’s visibility during the three phases of an IPO.

The Pre-Filing Period

The Pre-Filing Period begins one to two years prior to filing an IPO Registration Statement with the Securities and Exchange Commission (SEC). This IPO Registration Statement (also known as an S-1) includes a preliminary prospectus, or more commonly known as a “Red Herring.”

During this time, it is important to act like you’re already a public company. You’ll need to establish strategic plans, internal controls, financial accounting and reporting, employee incentives and investor relations programs. This is also the time to establish an effective business communications strategy (which can include such disparate activities as media relations, industry analyst relations, financial analyst relations, marketing, advertising and media buying).

Other activities during this period include selecting underwriters (investment bankers), an accounting firm and a law firm. Choose an investment banker with strong analyst coverage to facilitate market research after the IPO.

This is also the period in which you prepare your draft prospectus or Red Herring and your S-1 Registration Statement. Your business communications strategy must be in place and implemented now, with help from your underwriters, to prevent any SEC problems during the Pre-Filing, Waiting, and Quiet Periods.

The Pre-Effective (“Waiting”) Period

The Waiting Period typically runs from the filing of the S-1 to the date it has been declared effective by the SEC. On average, this can be one to three months before the IPO.

During this time, it is important to continue to execute your business communications strategy, with the direction of legal counsel. Again, it’s a fallacy to think that you can’t say anything to anyone during the Waiting Period. In fact, you can maintain the same level of business communication that you established before the Waiting Period, as long as it’s unrelated to the IPO.

Why should your communications strategy, along with an advertising media buying schedule, be prepared so far in advance of a planned IPO? Let’s look at advertising as a simple example. You can’t be seen as inflating your opening day potential if you are executing a media buying schedule you had planned before writing your S-1 or Red Herring. Likewise, if you have an editorial calendar matrix in place before the filing, as long as it’s not financially focused, your PR activities can follow that matrix.

This is also the time to embark on a “road show” to potential investors and analysts. After the effective date of the S-1, your business communications are limited to only those things included in your Red Herring or draft prospectus. That’s important to know. The limitation on business communications is meant to avoid any charges of “gun-jumping” by the SEC.

Gun-jumping is broadly defined as stimulating interest in the IPO prior to the filing of the registration statement. The SEC can impose sanctions or fines or the indefinite postponement of the IPO if they find you’ve jumped the gun.

The Post-Registration (“Quiet”) Period

The Quiet Period runs from the effective date of the S-1 to as much as 30 days after the IPO.

When the SEC declares the S-1 effective, and IPO shares are priced, a press release on the offer is issued. (This release is usually drafted by your company’s attorneys, with help from their underwriters.) After the effective date of the S-1, your business communications are limited to only those things included in your final prospectus – again, to help avoid SEC gun-jumping charges.

So what’s your best use of time now? Work behind the scenes. You need to start planning marketing and public relations strategies to be implemented the moment you emerge from the Quiet Period. A spike in the first day of trading is every company’s IPO dream. But to keep that spike from potentially free-falling, you need a coherent communications strategy that continues to build your reputation and your credibility among customers, partners and investors, as well as the rest of the audiences that influence the capital markets.

In general, it’s important to learn to balance investors’ short-term and long-term expectations. But you’ll need to work harder on selling investors on your long-term strategy and how you are successfully executing on your business plan. Once you’re out of the Quiet Period, that selling needs to begin in earnest, with an energetic and focused communications program.

Conclusions

So what should you take away from this look at pre-IPO business communications? Overall, laying the groundwork for an IPO well before you file makes the whole process smoother and more successful.

Start acting like a public company before you begin the process formally. Treat your business communications as a serious first step in the process, and begin communications early enough to carry you through the various phases of the IPO.

Finally, don’t fall into the trap of complete silence during your IPO process. You’ll do yourself and your corporate valuation a great disservice.

Marc Hausman is president and CEO of Strategic Communications Group, Inc., a nationally recognized, award-winning public relations firm that provides integrated communications and business development services to help its clients increase sales, profitability, and corporate and product valuation. Contact Marc at mhausman@gotostrategic.com or 301-408-4500.

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